Adelaide property an attractive investment alternative

Developers and investors are turning their sights on Adelaide’s residential and commercial markets as rising prices and offshore competition for sites in eastern-state capitals makes them look at alternative markets.

A growing differential between house prices in the SA capital and eastern states, along with a wave of infrastructure investments in the CBD and state government property sales are some of the reasons underlying growing interest in the city.

“The Adelaide market always works, but it’s the last in the cycle," Brian Haratsis, the chairman of planning consultancy MacroPlan Dimasi, said.

Developers such as Melbourne-based Asia Pacific Group, which is building 27-storey Vue, the city’s tallest residential building, point to the difference in yield on an asset such as one-bedroom apartment.

“In Sydney, you’re going to get about 2 per cent to 3 per cent, whereas we’re working on a 5 per cent to 6 per cent yield in Adelaide,"
Asia Pacific
chief executive
William Deague
said. Most of the 175 out of the 205 apartments sold to date have been to locals, and Adelaide selling prices had to rise to about $8000 per square metre from the current $7000 to get on more developers’ radars, but Adelaide was part of a market – like Brisbane – that was drawing more attention, Mr Deague said.

“Sydney is getting to a point where, as a developer, I’m not even looking at sites," he said.

Return to east-south migration pattern

The median house value in Sydney last week was $635,000, in Melbourne it was $478,000 and in Adelaide it was $405,000, RP Data figures show.

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The gap is prompting a return to a historical pattern of migration from the more expensive eastern states, especially among retirees, said .

“Before the GFC, people really did retire to Adelaide. It’s on again now," Mr Haratsis said.

MacroPlan Dimasi last month opened an Adelaide office, headed for now by consultant and former Property Council of Australia chief commercial officer Nathan Paine, but which it hopes will grow to eight full-time staff – the size of its Perth office – over the next two years. Infrastructure developments such as the new Royal Adelaide Hospital, SAHRMI building and Adelaide University’s new Adelaide Medical and Nursing Schools are driving activity in the north-west corner of the CBD.

In addition to planning reforms that have sped up developments such as Vue and permitted greater building heights, new properties are also coming to the market.

Tenders close on Friday for the sale and leaseback of five government-owned properties, including the State Administration Centre on Victoria Square and other buildings on Flinders St, Victoria Place, Gawler Place and Wakefield Place. Premier
Jay Weatherill
’s government is also taking steps to dispose of the state Motor Accident Commission’s $600 million interstate and local property portfolio.

In the private sphere, the race to develop the SANFL’s 23-hectare AAMI Stadium precinct at West Lakes, largely redundant after the upgrade of Adelaide Oval, is understood to have narrowed to two local developers, Qattro and Commercial & General.

A spokesman for stadium owner, the South Australian National Football League, said it could be up to two months before a preferred bidder was confirmed.